Cent. Carolina Surgical Eye Assocs., P.A. v. Matthews
| Citation | 2022 NCBC 14 |
| Decision Date | 16 March 2022 |
| Docket Number | 21 CVS 3201 |
| Parties | CENTRAL CAROLINA SURGICAL EYE ASSOCIATES, P.A. by and through GERALD JEUTTER, Receiver, Plaintiff, v. JOHN D. MATTHEWS, M.D., Defendant. |
| Court | Superior Courts of Law and Equity of North Carolina |
1. THIS MATTER is before the Court upon Defendant John D. Matthews, M.D.'s ("Matthews") Motion for Judgment on the Pleadings Pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure ("Rule(s)") ("Matthews' Motion") (ECF No. 31), [1] and Plaintiff Central Carolina Surgical Eye Associates, P.A.'s ("CCSEA"), Rule 12(c) Motion for Judgment on the Pleadings ("CCSEA's Motion;" together, the "Motions"), (ECF No 29).
2. Matthews contends in his Motion that CCSEA has asserted claims that expand or add to the claims CCSEA previously asserted against Matthews in a prior, now voluntarily dismissed action and that those claims should be dismissed in part or in full because they are time-barred or because they fail to otherwise state a claim.[2] 3. CCSEA asserts in its Motion that four of Matthews' counterclaims, each of which seeks recovery of sums Matthews alleges he is owed for unpaid compensation and distributions as an employee and shareholder of CCSEA, are fatally deficient as pleaded and should be dismissed as a matter of law.[3]
4. After reviewing the Motions, the related briefing, the arguments of counsel at the hearing on the Motions, and other appropriate matters of record, the Court GRANTS in part and DENIES in part each Motion for the reasons set forth below.
Law Offices of Richard M. Greene, by Richard M. Greene, for Plaintiff Central Carolina Surgical Eye Associates, P.A.
Oak City Law LLP, by Robert E. Fields, III, for Gerald A Jeutter, Jr., Receiver for Central Carolina Surgical Eye Associates, P.A.
Pinto Coates Kyre & Bowers, PLLC, by Lyn K. Broom, and Teague Rotenstreich Stanaland Fox & Holt PLLC, by Steven B. Fox and Mallory G. Horn, for Defendant John D. Matthews, M.D.
5. CCSEA was an ophthalmological medical practice in Greensboro, North Carolina that was formed in 1992 when Richard Epes, M.D. ("Epes") and Matthews sold their interests in a predecessor entity known as Central Carolina Surgical Eye Associates, P.A. ("Old CCSEA") and formed a new medical practice using the same name.[4] Epes and Matthews acquired all of the stock in the new CCSEA, with Epes holding 75% of the stock and Matthews holding 25%.[5]
6. CCSEA alleges that Matthews entered an Employment Agreement with CCSEA in 1992 to provide ophthalmological services as a part of the sale of Old CCSEA and that Matthews has been a director and officer of CCSEA ever since. (2021 Compl. ¶¶ 5-8). The initial term of the Employment Agreement was for five years, and the Agreement automatically renewed for subsequent five-year terms unless Matthews provided notice of his intent to terminate at least one year prior to the end of any five-year term. (2021 Compl. Ex. A at 2.) The Agreement contained non-competition and non-solicitation covenants purporting to restrict Matthews' ability to compete against CCSEA and solicit its patients and employees.
7. The parties acknowledge that Matthews and six other CCSEA employees left their employment with CCSEA on 19 July 2012 and within days of their departure began providing ophthalmological services under the trade name Triad Retina and Diabetic Eye Center ("Triad Retina") at a fully equipped medical facility located within five miles of CCSEA. (2021 Compl. ¶¶ 14, 16; 2021 Answer ¶¶ 14, 16.) According to CCSEA, the Employment Agreement had automatically renewed for a five-year term through 30 June 2017 and was in full force and effect at the time Matthews and his departing colleagues terminated their employment with CCSEA. (2021 Compl. ¶ 13.)
8. CCSEA alleges that soon thereafter patients began calling CCSEA to report that Triad Retina had been calling them on behalf of Matthews and soliciting them to become new patients of Triad Retina. (2021 Compl. ¶ 46.) CCSEA further alleges that Matthews used confidential patient information to solicit patients away from CCSEA for Matthews' "financial benefit," ultimately causing "more than 1, 400 patients" to leave CCSEA's practice for Triad Retina and causing CCSEA to "suffer significant damages and loss of patient revenue[.]" (2021 Compl. ¶¶ 21, 33-34, 40.)
9. For his part, Matthews denies the enforceability of the Employment Agreement on various grounds, contends that the Agreement was terminated no later than 2007, rendering him an at-will employee at liberty to leave CCSEA's employment without further obligation thereunder, (2021 Countercl. ¶¶ 14, 23; see, e.g., 2021 Answer ¶ 14), and asserts that he was never an officer or a director of CCSEA, alleging that Epes "effectively shut him out of those roles[, ]" (2021 Countercl. ¶ 11; 2021 Answer ¶¶ 27-37, 43-55). He also asserts counterclaims, alleging that during his employment, CCSEA continuously undercompensated him, [6] failed to provide him with adequate equipment and facilities, [7] and failed to pay him required distributions.[8]
10. CCSEA is no longer operating and is in receivership. Old Battleground Props. v. Cent. Carolina Surgical Eye Assocs., P.A., 2015 NCBC LEXIS 19, *24 (N.C. Super. Ct. Feb. 25, 2015).
11. CCSEA's receiver, Gerald Jeutter, has filed two actions against Matthews arising from Matthews' departure from his employment with CCSEA in 2012. The complaint initiating the first action (the "First Action") was filed on 17 July 2015 (the "2015 Complaint"). In that action, CCSEA sought damages for Matthews' alleged breaches of contract and fiduciary duty and requested an accounting of and a constructive trust over all income Matthews received from former CCSEA patients after he terminated his employment with CCSEA.[10]
12. Matthews filed an answer and counterclaims in response to the 2015 Complaint on 20 August 2015. (2015 Answer and Countercl.) CCSEA subsequently moved to strike and dismiss Matthews' counterclaims, [11] contending, in part, that Matthews' counterclaims were asserted in violation of the Court's 22 June 2015 Master Case Management Order ("Master CMO"), [12] which applied to all pending In re Southeastern Eye Center matters, including the First Action. In that motion, CCSEA argued that Matthews' counterclaims should be dismissed because they were not presented in accordance with the claims process mandated in the Master CMO for the assertion of claims against CCSEA.[13]
13. On 23 November 2015, after consulting with the parties concerning the proper procedure for litigating and administering the parties' claims against one another, the Court, with the parties' consent, ordered Matthews to withdraw his counterclaims and submit any claims against CCSEA through the process set forth in the Master CMO.[14] At the same time, the Court consolidated the First Action into the In re Southeastern Eye Center group of consolidated cases.[15]
14. On 8 January 2016, Matthews withdrew his counterclaims in the First Action, "with the exception of the defense/counterclaims of Set-off/Offset, for a Constructive Trust and reservation of the right concerning the failure to prosecute[.]"[16] At the same time, Matthews filed an amended answer and counterclaims ("2015 Answer and Counterclaims"), contending that he was entitled to set-off against any sums he may owe to CCSEA all amounts CCSEA owed to him. (See generally 2015 Am. Countercl.) He also requested an accounting and a constructive trust, and asserted counterclaims against CCSEA for conversion, misappropriation, disposition of assets without shareholder approval, and failure to prosecute derivative claims. (See generally 2015 Am. Countercl.)
15. After extensive fact and expert discovery and substantial motions practice, CCSEA moved for partial summary judgment and both parties moved to exclude certain expert testimony. At the hearing on the motions on 24 September 2020, CCSEA announced its intention to voluntarily dismiss without prejudice all of its claims against Matthews under Rule 41 and promptly thereafter refile a new action against Matthews.[17] CCSEA moved to voluntarily dismiss the action under Rule 41(a)(2) on 30 September 2020, [18] and after full briefing by the parties, the Court granted CCSEA's motion on 12 November 2020, dismissing CCSEA's claims against Matthews without prejudice.[19] Soon thereafter, on 3 December 2020, the Court granted, with CCSEA's consent, Matthews' motion to dismiss his counterclaims under Rule 41(a)(2) and 41(c) without prejudice.[20]
16. After initiating this action on 8 March 2021, [21] CCSEA filed its new complaint against Matthews ("2021 Complaint") on 29 March 2021. (See 2021 Compl.) CCSEA reasserts in its 2021 Complaint claims for breach of contract[22] and breach of fiduciary duty and adds new claims for constructive fraud, restitution and disgorgement, and violation of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. G.S. § 75-1.1 ("UDTPA"). CCSEA also makes a new request for punitive damages. (See generally 2021 Compl.) CCSEA further alleges-again for the first time-that, during Matthews' employment, CCSEA was insolvent and that Matthews took excessive compensation and other money from CCSEA, mismanaged CCSEA's finances, and failed to retain and recruit physicians, all of which contributed to CCSEA's insolvency, breached Matthews' fiduciary duties to CCSEA, and constituted unfair and deceptive trade practices under section 75-1.1.[23]
17. Matthews filed his Counterclaims on 10 June 2021. Matthews reasserts his 20...
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